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Toon finances: is Ashley really our saviour?

Posted on August 11th, 2011 | 28 Comments |

Newcastle United's financial situation.
Are they saving the club?
A look at Newcastle United’s financial situation to see what Mike Ashley really has done for the club.

One of the things we often hear is that, even if he has no other redeeming features, at least Mike Ashley is sorting out the finances at Newcastle United.

It has become something of a mantra for the pro-Ashley fans but let’s have a look at the figures and see if that mantra is justified.

Before I do that though, I need to disclaim a few things. I’m not a financial expert. I do know a bit about running the books for Limited Companies but obviously nothing the size and scale of Newcastle United.

Additionally, the figures I’m quoting below are from financial reports filed at Companies House which I paid to access via a popular online supplier, so I’m merely trusting that they’re correct.

A First Look At The Books

The following table of figures is taken from the last five years of reports filed by Newcastle United Ltd, which are currently complete up to the 09/10 financial year (Newcastle run July – June for their financial years):

  05/06 06/07 07/08 08/09 09/10
Net Assets 16.8m -£12.9m -£33.3m -£51.4m -£68.5m
Net Worth -31.4m -£54.8m -£73.6m -£95.8m -£98.9m
Operating Profits -£00.6m -£25.9m -£24.7m -£37.6m -£33.4m
Pre-Tax Profits -£12.0m -£34.1m -£20.3m -£15.1m -£17.0m
Book Value 16.7m -£12.9m -£33.3m -£51.4m -£68.5m

The first thing to note is that since Ashley took over in 2007, Net Worth and Net Assets have continued to decline, so if that’s any measure by which we intend to judge Ashley he fails miserably. However, we have to bear in mind that it takes considerable time to turn around a company and there are encouraging signs in that Pre-Tax Profits are improving. It’s actually a Pre-Tax Loss but it stands at half of what it was before Ashley took over.

Operating Profits don’t look quite so good, although there was an improvement in the 09/10 accounts over the 08/09 accounts.

Perhaps the most worrying figure of all is the so-called ‘Book Value’ of the club. The ‘Book Value’ is essentially what you’d be left with if you closed the company down, settled its debts and liquidated its assets and in Newcastle’s case that has slumped horrendously throughout the entire 5 year period shown in the accounts.

Debt Restructure

One thing Ashley has done is to restructure our debt. We owe him (or the holding company he used to buy Newcastle United) money now rather than other people. Furthermore, the loans he’s given us are interest free, so we have saved money in that respect. Back in 07/08 our interest payments were £6.6m/year but in 09/10 that had dropped to £1.8m/year.

You can see Ashley’s financial injections by looking at the table of liabilities below:

  05/06 06/07 07/08 08/09 09/10
Bank Overdraft* £16.3m £10.8m £00.9m £35.7m £10.3m
Short-Term Liabilities £67.8m £110.6m £37.2m £180.8m2 £154.4m
Long-Term Liabilities £79.0m £49.0m £138.6m1 £25.8m £37.4m
Total Liabilities £146.7m £159.7m £175.8m £206.7m £191.8m

*Overdraft is included in the Short-Term Liabilities figure.

In 07/08 our Long-Term Liabilities suddenly jump from £49m to £138.6m1 as Ashley loans the club £111m, whilst our Short-Term Liabilities drop from £110.6m to £37.2m as Ashley clears what we owe on that front.

Then in the 08/09 financial year he moved a lot of what we owed him from Long-Term Liabilities to Short-Term Liabilities: Long-term Liabilities went down from £138m to £25m while Short-Term Liabilities went up from £37m to £180m2. I’m not totally sure why he moved the liabilities like that but it may have been to reduce our gearing. Gearing is kind of a measure of how we’re funded and it’s based on Long-Term Liabilities and Overdrafts. The better our gearing the less reliant on long term borrowing we are and thusly more creditworthy.

Signs For The Future

But the point is this. There are some good signs, such as operating and pre-tax profits seeming to take a turn for the better, and of course it’s better that our loans are interest-free. Furthermore, financial restructures take time, but Ashley has not yet proved he can do what’s necessary at Newcastle United. Net Worth is worse, Net Assets are worse and the club’s Book Value is worse.

Of course you can blame some of alleged financial recovery’s tardiness on our relegation, but that’s no excuse for Ashley as he was the man who presided over that relegation – it’s not as if he can blame it on the Shepherd regime.

When the 2010/2011 figures are in – probably around May 2012 – we can take another look but, as it stands, there is no proof that Ashley is our ‘financial saviour’ yet and many things can go wrong in the interim.

Intent

For the record, I do tend to think Ashley is moving things in the right direction financially and I also think the 10/11 accounts will show further improvement. But perhaps what interests me most is why Ashley is doing that. Has Newcastle United gone from being the passionate hobby club he once described as one of the “crown jewels of English football” to a financial millstone with which he simply wants to balance the books until he can get his money back?

You see, if Ashley’s engaging in prudent finance now to set us up to be successful on the pitch in future years then I’d give him fair consideration for doing so, but if he’s just trying to make the club pay its way until a buyer comes along and he can get his money back then I’m not happy. The thought of planned mediocrity doesn’t sit well with me.

What do you think?

NUFCBlog Author: Hugh de Payen I'm a baby-boomer of the punk rock persuasion, currently exiled in Somerset for crimes committed in a previous life where locals keep trying to poison me with something called 'scrumpy'. Hates sprouts, coat-hangers, Cilla Black, ornaments, Steven Seagull movies and 50 Cent (he's not worth 10). Hugh de Payen has written 634 articles on this blog.

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28 Responses

  1. …interesting.

    …need to wait until 10/11 is in before we can pass judgement.

    …looks better then I thought to be honest.

  2. I just want decent players and decent football.
    Sick to the back teeth of the bullshit and drivel regarding finance FFS.
    Either assemble a decent team MA or Fook OFF.

  3. Is anyone else not sick to the back teeth of all this crap about agent fees,heating for the pitch,dug out seats,signing on fees for freebies etc?

    I really has done my head in since the asset stripper moved in.
    A few defeats,few injuries,few suspensions and this team will be on it’s backside in my opinion.

    I still think there are more players to be sold.

  4. personally i’ve never thought he was out to destroy the club or anything like that.
    i think he bought newcastle on a whim,and thought the premier league was awash with cash.he also wanted a place where him and his mates,could have a laugh and a drink at the weekends.a kind of haven away from the cut and thrust of london,he then realised he’d been done over by john hall,and from that day on he’s never been that interested imo.he probably thought the club would run itself,by generating it’s own income,and very little investment from himself.which in a lot of respects is what he’s trying to do now.
    why didn’t he buy a season ticket like everyone else,if he’s supposed to be a fan?.
    i think he also bought the club to try and make himself look the big man,to his long term rival dave whelan.
    i dont think he ever intended hanging around very long,as just before xmas time of 07,there were reports in america,that he was trying to sell the club for 400 million.imo he was definatley trying to punt the club on for a massive profit.
    like a lot of fans are saying,if he is not interested in building a decent side,then he should leave.
    this so called plan he’s trying to execute has more holes in it,than lyndsey dawn mckensie’s knickers.

  5. Really don’t think the club is moving in any direction financially. It’s all just a big gambling game for the owner. As he said when he first came he wanted a bit of fun. His idea of fun is to make as little outlay as possible and see if he can stay up in the Premiership whilst promoting his cheap brand.
    Ambition to take this club to a different level, or giving his customers the value they are seeking (and paying for), is not part of his remit.
    The only thing this bloke has done is take us down and make us a laughing stock.
    No one has a good word to say about Shepherd but at least he knew what the game was all about and had us competing every year without the fear of relegation.
    Yes he may have made money from the club but he didn’t have the ground looking like a second rate supermarket either.

  6. Well, after the way he has been treated by NUFC fans, insulted and so on, I wouldn’t be surprised if his intentions for NUFC have changed from when he first took over. I think the Fans after their antics in the stadium and general abuse, which let’s face it, few would have the balls to say face-to-face to Ashley, I say, the fans have now got to accept that if NUFC has become a club that is not financially supported by its owner, who no longer shares the same Ambition as they do, it is partly their own fault. Congratulations! all your whining, bickering, immature personal abuse and all-round short-sightedness has finally turned the great NUFC into at best, a mediocre premiership team. Newcastle UNITED? whatever!

  7. I could answer that Hedgehogge but I really cant be arsed to lower the level of intellect on this board to an all time low :(

  8. ‘…but if he’s just trying to make the club pay its way until a buyer comes along and he can get his money back then I’m not happy….’

    Hugh,

    Why are you not happy?

    As inevitable as death and taxes, the club is going to be sold and sold again and again and again and so on as its commodity to be traded. There will be new owners, some bad, some terrible and by some miracle perhaps a good one but all cut from the same money focused coat.

    The only alternative is for the structure of the club to be ‘owned’ by some permanent organisation, but given the shisters who proclaim they represent the ‘true fans’ nothing is going to happen.

  9. Hedgehogge – I would be more than happy to tell Fat Mike exactly what I think of him to him face, I would love the opportunity.

    The man and he cronies have been proved liars in a court of law, he and certain overrated players were to blame for our relegation to the 2nd division. And dont get me started about how he treat Alan Shearer & Chris Hughton.

    I suspect you are not a NUFC fan, so go away and dont comment about things you know nothing about. Try looking at the bigger picture instead of getting all your information about NUFC fans from SSN.

  10. pardew has said they are now focusing on incomings and not outgoings,with a fullback and a striker as priority.
    hopefully we’ll get them in,hoping being the operative word where ashley and co are concerned.

  11. @6 I agree to a large extent with what you say. All the abusers try putting themselves in Ashley’s place. You’re very rich, you’ve taken over a football club for a laugh, you aren’t particularly experienced in the art of running a club and you make some mistakes. You realise very quickly that these ‘customers’ are not like any you’ve’ ever dealt with before, they’re not just buying a product from your shop, they actually ‘love’ the company and to some their very existence is intertwined with the goings on at the club.
    You think…’Oh I know what will make them happy…I’ll bring back their local messiah to run the club’…oh sh*t he’s got a mind of his own and he’s telling ‘me’ how to run the business…..not like previous employees I’ve had, where basically if I said jump they would ask ‘how high sir’ …..
    Ahhh sack him!…Oh hell that’s upset the locals, what’ll I do now?????Bloody hell they’re turning nasty it’s like something from a Frankenstein movie, they’ll be storming up Barrack road with burning torches if I don’t do something quick…tell you what!..might keep them happy if I tell them a few porkies whilst I sort something out…Chr*st those thieving Geordie gits……they didn’t tell me how much brown stuff the club was in when I bought it from them, bloody hell what’s that say on that bedsheet Cockney What oot!…..oh I’ve had enough of this I want out and all my money back [plus some interest of course]….Ah hell, just what I needed, a world recession, nobody wants to buy football clubs anymore sh*t!!!……………………Ah well stuff the Geordie gits!…they hate me & I hate them….Bollix to them!!!!!

  12. A well reasoned look at the books.

    The financial saga at the toon smells a little like what Eddy Shah did in the 80’s to the newspapers.
    All of the other chairmen and people who are not megga rich will be hoping that the toon can stay mid table and reduce its debt. Because that’s what they would like to do. I think most premiership clubs know that the best position they will get is mid table. So why not reduce the ambition on the quiet and save some cash. It will be a sad outcome for fans and football.

  13. In answer to Hedgehogge.
    In building up his business over the years to the size it is now, I would imagine Ashley has had to deal with greater corporate abuse, underhand dealings, jealousy and business shennanigans than a few supporters calling him names and displaying their handwritten bedsheets. It hasn’t stopped him continuing to ruthlessly grow and put everything into his business.
    Unfortunately he hasn’t got the same desire and ambition for Newcastle United. Many supporters can see that, it’s people like you who are supposed fans of this club who make excuses for him for reasons I just can’t get my head round.

  14. There’s one thing I’ve read today that sums up how far we’ve fallen. Stoke are bidding £17m for Peter Crouch and also looking to take on Barton and give him £60k a week. Stoke!

  15. Micky Toon

    the problem is a lot of NUFC fans would rather that WE were bidding £17m for Crouch. It’s lunacy.

  16. @ Joe Soap, Trojan,

    exactly. it is true that in some way, it’s just a sad sequence of events. Trojan, yeah, he’s made mistakes, and I do resent him for that, too. It just seems a bit hypocritical to slag Ashley off at every opportunity, and at the same time expect him to pay out of his own pocket to send us into the Champions league….

  17. Kamar says: ”
    August 11, 2011 at 2:26 pm

    ‘…but if he’s just trying to make the club pay its way until a buyer comes along and he can get his money back then I’m not happy….’

    Hugh,

    Why are you not happy?

    ====

    Kamar, because I fear having to go through what my wife went through as a Villa supporter under Doug Ellis, which is supporting a club whose only aim is to remain in the Premier League. Season after season of planned mediocrity.

    I *want* an owner who doesn’t financially ruin the club, but I also want that owner to have some ambition and enthusiasm for the football we play. I don’t want an owner whose singular aim is to get his money back and get out.

  18. hedgehog, I’ve not heard or read anything that would suggest that fans are wanting us to go in for Crouch, infact the opposite.
    I’d be livid if we were spending £17m on Crouch. I’d rather we bid £15m for Sturridge.
    I don’t see anything wrong with people wanting the Caroll money spent on the team. Nothing wrong with that at all.

    For a club that was one of the teams that was to join a breakaway super league when we weren’t even in the top division on the back of our status as a club to where we are now is a disgrace.
    I don’t have a blind hatred for Ashley, nor do I see him as some kind of financial wizard that has saved the club from administration. Anyone with his money could have done it, anyone.
    Ashley needs to realise he is in the entertainment business, we don’t pay to watch a presentation on how much the club finances have turned around, how much better our bottom line is now than it would have been under the previous regeime. We pay to be entertained. To watch a game of football and win, lose or draw, at least be entertained. One of the best games I’ve seen at SJP was a 0-1 defeat to Arsenal. To me, as long as the team have given 100% and tried to play entertaining football I’m happy.
    I thought Ashley bought NUFC to have some fun. It’s not much fun being a fan these days, so perhaps Ashley gets enjoyment out of watching undersoil heating go in or seeing new advertising go up in the ground. Perhaps I’m being too hard, they probably let Mike drive the cranes and the diggers, so I guess that would be fun.

    Roll on May 2012 ;-)

  19. hedgehogge, it’s like fat freddie shepherd says,”you have to have broad shoulders to take the stick,when things are not going well”.he’s a big boy ashley he should just take it on the chin,instead of crying to owlheed,then him coming out to plead with the fans to stop calling him.he just makes himself look like a dick,when he complains about it.
    i remember when we were in the championship,and we were away at ipswich,and the fans were calling him.
    there was a close up of him with his head in his hands.
    it must get to him,and no one wants to get abuse,but if he wants to run the club his way,he has to take the opposition to it.

  20. “Newcastle now go into the game against Arsenal without a recognised left-back, but Shane Ferguson did train today”

    “A replacement is ongoing as we speak. We need to put in place our back-up plan now but I think it’s unfair to name names in public.”

    Would someone please tell me I havent slipped into an alternate parallel universe where common sense has been replaced by nonsense ?

  21. JoeSoap says:
    August 11, 2011 at 2:53 pm

    “You’re very rich, you’ve taken over a football club for a laugh,”

    He hasn’t taken the club over just for a “laugh” JoeSoap, he had very definite intentions for the club when he took over despite what he says, just as he did for all the other struggling brands he hoovered up.

  22. crouch £17m, but £14m for pavlyuchenko. Weird!
    Neither are worth anything near those prices.
    :)

  23. @ clint flick

    crouch is dead money now as hes over 30 and it would be crazy to spend that much on him

    pavlyuchenko for 10 max but hes never settled in england and would be a huge risk

    i cant see us spending half that kind of money but we shall see in the next couple of weeks

    i would love to know the real reason ashley bought the club as i cant figure it out at all!

  24. dug,
    Aye mate, crouch=waste, how he gets in the england team makes you realize how shit that set up is.
    Pav, i reckon at the right club he’d be excellent. He needs to play regularly. I remember watching him link up with arshavin for zenit. They rocked.
    But like you say £10m absolute max, he’s under confident & would need that rebuilding. It could easily happen though as he’s used to english football now.

  25. geordiedug says:
    August 11, 2011 at 8:04 pm

    “i would love to know the real reason ashley bought the club as i cant figure it out at all!”

    It’s good to look at his other brand takeovers such as Lonsdale, Dunlop / Slazenger and what he did with them geordiedug, especially the cost cutting and lowering of quality.

    A vehicle to promote his Sports Direct brand in lucrative new markets around the world, especially the far East, is a good reason amongst others.

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